Atlanta Braves Holdings, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Amounts below are in millions unless otherwise noted. The unaudited statements are combined historical results of the Liberty Braves Group. The separation from Liberty Media was completed on July 18, 2023, after quarter-end.
Business context and results
The company operates the Atlanta Braves and Truist Park, and The Battery Atlanta mixed-use development. Revenue is seasonal, with most recognized during the second and third quarters.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $270.1 | $250.3 | $301.1 | $271.9 |
| Operating income (loss) | $19.5 | $27.6 | $(29.8) | $(18.7) |
| Adjusted OIBDA | $42.1 | $48.2 | $11.0 | $22.8 |
| Net earnings (loss) | $(28.9) | $63.7 | $(86.9) | $40.7 |
| Operating cash flow | Not provided separately | Not provided separately | $35.9 | $98.0 |
Q2 baseball revenue was $254.9 million and Mixed-Use Development revenue was $15.2 million. Q2 baseball event revenue rose to $162.4 million from $145.1 million, broadcasting revenue to $68.6 million from $63.7 million, and Mixed-Use Development revenue to $15.2 million from $13.4 million. Average home-game attendance was 32,556, compared with 31,839, over 43 games versus 41.
Financial position and liquidity
- At June 30, cash and cash equivalents were $130.5 million; restricted cash was $52.0 million. Current assets were $264.1 million and current liabilities $220.2 million.
- Total debt was $538.7 million, including $7.2 million current and $531.5 million long-term; finance lease liabilities were a further $106.0 million. Debt was $542.0 million at December 31, 2022. The company reported $50.2 million of floating-rate debt at a weighted average 6.7% and $492.6 million of fixed-rate debt at 4.4%.
- Six-month capital expenditures were $29.7 million. Cash, cash equivalents and restricted cash increased by $9.8 million to $182.6 million, including $35.9 million operating cash inflow, $29.6 million investing outflow and $3.5 million financing inflow.
- Management said projected cash uses include player, coach and executive contracts, capital expenditures, real estate investments and debt service; it expects to fund them with cash on hand, operations and borrowings, and believes available liquidity is sufficient. The company was in compliance with all financial debt covenants.
Material changes and unusual items
- Q2 revenue increased about 8% year over year, but operating income fell by $8.1 million and Adjusted OIBDA declined $6.1 million. Baseball operating costs rose $25.9 million, including higher player salaries, revenue sharing, and variable concession and retail costs.
- For the six months, revenue increased about 11%, but Adjusted OIBDA declined $11.8 million and operating loss widened $11.1 million. Higher baseball expenses and Split-Off-related corporate costs contributed; interest expense rose $5.8 million, primarily due to higher rates on variable-rate debt.
- Net results included non-cash mark-to-market losses on intergroup interests of $49.4 million in Q2 and $62.8 million for the six months. The filing’s pro forma net earnings, excluding these losses, were $20.5 million for Q2 and a $24.1 million loss for the six months; pro forma basic earnings per share were $0.33 and a loss of $0.39, respectively.
- Q2 impairment and related costs of $0.2 million (six months: $0.5 million) related to hurricane damage at the Florida spring training facility. The 2022 six-month comparison included a $20.2 million gain on sale of the minor league clubs.
Outlook, risks and contingencies
- Diamond Sports Group, parent of the local broadcaster, filed for Chapter 11 in March 2023. The Braves continued to receive scheduled payments, but may have to repay up to $34.2 million received during the preceding 90-day preference period. If the broadcast agreement is rejected, the company says it could lose remaining contract revenue and may need to write down $24.4 million of receivables and contract assets.
- Long-term employment contracts totaled $1,017.6 million at June 30, payable over multiple years; the filing also notes subsequent contracts expected to require about $12.4 million through 2024, excluding incentives.
- Management cited risks including debt and financing needs, interest rates, consumer demand and inflation, labor and MLB arrangements, broadcasting revenue, the Mixed-Use Development, litigation, regulation, and risks or costs arising from the Split-Off. The filing provides no numerical earnings or revenue guidance.
- The Split-Off was intended to be tax-free to Liberty Braves shareholders. Liberty and Atlanta Braves Holdings entered into transition, tax-sharing, services, facilities-sharing, aircraft time-sharing and registration-rights agreements. Liberty stated it intended within one year to exchange or dispose of its 1,811,066 Series C shares.
Important facts for investors to verify
- Developments in Diamond Sports Group’s bankruptcy, including broadcast payments, potential preference repayment and recoverability of the $24.4 million receivable balance.
- Cash generation and capital needs through the remainder of the season, including restricted cash, construction-loan availability, debt maturities and variable-rate exposure.
- Player-contract commitments, payroll and revenue-sharing costs, and their effect on baseball operating margins and Adjusted OIBDA.
- Post-Split-Off arrangements and Liberty’s planned disposition or exchange of its Series C shares, as well as any associated tax or transition costs.
- The company’s non-GAAP Adjusted OIBDA and pro forma earnings exclusions; these measures do not replace GAAP operating income, net earnings or cash flow.